Buying at auction can be a way of getting a bargain. However, there are some key differences between auctions and normal sales, so you need to be aware of what’s involved.
Despite a slowdown in the sector, buying at auction is still popular with buy-to-let landlords. While people buying properties to rent out are generally experienced, it is vital to understand how things differ in the auction world.
1. Reserve Prices
Properties sold at auction will often have a reserve – a price below which the sale cannot proceed. Estimate or guide prices must not be set lower than the reserve in order not to mislead potential bidders.
2. Searches and Surveys
When buying via an estate agent you would normally have searches and surveys done as part of the process. When buying at auction legal documents are usually available from the auctioneer. You should have these reviewed by a solicitor, as they are likely to affect how you bid. Searches are sometimes included. If they aren’t you could pay for your own – though of course you’d lose this money if you chose not to bid.
3. Property Condition
Properties for sale at auction can be in bad condition or in need of modernisation. If you don’t want to pay for a survey, it’s a good idea to take a trusted builder along when you view the property so you can price in any renovation that may be needed. Experienced landlords may have CRM for property management from somewhere like propertydeck that makes it easy to find your preferred trades people.
4. Be Prepared
Make sure you know what is required before attending the auction. You will usually need some form of ID in order to register to bid. You also need to know what forms of payment are acceptable for the deposit and how long you have to complete the transaction. Buying at auction usually means you need to have cash available, as there isn’t time to arrange a mortgage.
5. Properties That Don’t Sell
Property auctions usually have a reserve price, known only to the auctioneer. If this isn’t met the property won’t sell. However, in these circumstances it’s often possible to do a deal with the auctioneer. Check on their website to see the price a property may be available for.